Ampro-Mag is a small company that makes materials for safely controlling hazardous spills of all kinds.It sells these items as a neutralizing kit priced at $100 each.The costs of the materials that go into each kit are $25.It costs $5 in labor to assemble a kit.The company has monthly expenses of $1,000 for rent and insurance,$200 for heat and electricity,$300 for advertising in trade journals,and $3,000 for the monthly salary of its owner.Ampro-Mag's average revenue per unit is
A)$30.
B)$70.
C)$100.
D)$130.
E)$4,500.

Question

Quizplus · Accepted Answer

To find the average revenue per unit, we need to subtract the total cost (cost of materials and labor) from the selling price and then divide by the number of units sold.

Total cost per unit = $25 + $5 = $30

Total monthly expenses = $1,000 + $200 + $300 + $3,000 = $4,500

To break even, the company needs to sell 45 units per month (since 45 units x $30 cost per unit = $1,350, which covers the $4,500 in monthly expenses).

Since the selling price per unit is $100, the average revenue per unit is:

($100 - $30) / 1 = $70

Therefore, the best choice is C.

Ampro-Mag Is a Small Company That Makes Materials for Safely